At its simplest level eProcurement describes the business-to-business purchase and sale of supplies and services over the Internet. From access to online product and catalogue information through electronic payment services, the Internet facilitates seamless exchanges in support of electronic commerce.
Properly planned and executed, an eProcurement system will reduce the time required to complete transactions, prevent maverick purchasing, and capture information that allows management to scrutinise buying patterns. It also prepares the buying organisation with statistical tools to better negotiate new contracts.
Tangible benefits from the use of eProcurement include:
» Reduced cost of purchases through improved sourcing on indirect and direct commodities
» Reduced operational costs through elimination of manual processes
» Rationalisation and optimisation of supply chain
» Reduction or complete elimination of maverick spend
» Reduction in order errors and returns
» Decreased cycle times
» Comprehensive, automated auditing and tracking
» Increased and more sophisticated reporting Intangible benefits include
» The ability to introduce or improve commodity and supplier management
» A stronger relationship with preferred suppliers
» Reduced turnaround and improved throughput
» Improved trending of cost-centre spending
» Improved visibility of price changes
» Improved spending controls and employee compliance
Compliance Savings: Eliminating maverick spend by restricting buyers to contracted suppliers and leveraging the opportunity provided by eProcurement to implement an eSourcing strategy creates an average saving of 13.2% in goods and services, according to research by Precoro.
Labour Savings: Precoro states that manual procurement is, on average, an 11-step process with administration costs to process a purchase order requisition ranging from £25 – £40 depending on the cost of a company’s resources.
Through approval workflow and administrative efficiencies, eProcurement can reduce this cost by as much as 80%. It is more difficult to accurately account for the intangible benefits, but their organisational impact can nonetheless be great and they should therefore be factored into any business case.
Source: [Wax Digital research: Supplier Adoption Guide]